The economic analysis division of Mapco Enterprises has estimated the demand fun

Question

The economic analysis division of Mapco Enterprises has estimated the demand function for its line of weed trimmers as Qd = 18,000 + 0.4N - 350Pm + 90Ps where N = number of new homes completed in the primary market area Pm = price of the Mapco trimmer Ps = price of its competitor's Surefire trimmer In 2010, 15,000 new homes are expected to be completed in the primary market area. Mapco plans to charge $50 for its trimmer. The Surefire trimmer is expected to sell for $55. a. What sales are forecast for 2010 under these conditions? b. If its competitor cuts the price of the Surefire trimmer to $50, what effect will this have on Mapco's sales? c. What effect would a 30 percent reduction in the number of new homes completed have on Mapco's sales ( ignore the impact of the price cut of the Surefire trimmer)?

Explanation / Answer

a) as competitor's price is higher so forecast= 18000+.4*15000-350* 50+ 90*55= 11450

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